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A Strategy To Test The Need For In-House Counsel

A try-before-you-buy fellowship program allows DCU to assess the value of new legal resources.

When David DeWitt, vice president of risk management at Digital Federal Credit Union ($6.3B, Marlborough, MA), first heard about Boston University’s In-House Counsel Fellowship Program, he knew immediately that it presented a great opportunity to see whether DCU could benefit from in-house legal assistance.

The program, started by BU’s School of Law in 2012, places law students and graduates with commercial corporations and nonprofits. Commercial corporations pay $50,000 and nonprofits pay $40,000 for a one-year fellow that has taken courses in business and transactional law and is more interested in becoming an in-house counsel than practicing with a law firm.

CU QUICK FACTS

Digital Federal Credit Uniondata as of 03.31.15

HQ: Marlborough, MA

ASSETS: $6.3B

MEMBERS: 492,499

12-MO SHARE GROWTH: 11.91%

12-MO LOAN GROWTH: 16.21%

ROA: 1.24%

“It was originally introduced to us as a legal regulatory and compliance specialist position by Dan Egan [then president of the Massachusetts Credit Union League],” DeWitt says. “He described this as an opportunity for us to address all the new regulatory requirements and consumer regulations coming down that were presenting a challenge to credit unions on the compliance front.”

But DCU, an almost $6 billion organization in Marlborough, MA, already had a general counsel and a capable senior team for its risk-management and business areas: would there be enough work to keep an in-house attorney busy?

Fellow candidates are recent law school graduates who have passed the Massachusetts Bar Exam and held internships in a variety of industries, which gives them a range of business and legal skills.

After DCU conducted its interview process, it selected two fellows to begin working in December 2013. Their first assignment was to participate in a training program run by the Massachusetts Credit Union League, thus they were well oriented when they began working on-site at the beginning of January.

“They spent three weeks learning about the credit union system and the regulatory environment we operate in and had an introduction to the relevant consumer laws and regulations,” DeWitt says.

The credit union’s new legal resources were ready to work, but getting DCU’s senior team used to having not one but two in-house attorneys proved a bit of challenge. So the credit union had to prime the pump.

“We gave them some ideas and asked them to think of the legal challenges and research for which they would reach out to an attorney,” DeWitt says. “We put it in their heads that they had this resource now. It wasn’t just a risk-management resource but one for all the areas.”

It took a couple of months for everyone to understand what it meant for DCU to have its own attorneys. Once that happened, their full value quickly became apparent.

“A lot of the value came from their research and things we might never have done, such as risk reviews,” DeWitt says. “We benefited from the resources these grads were able to develop.”

For compliance issues, most of the attorneys’ workload comes from DCU’s risk management and business areas. For legal issues, the workload centers on risk management and general law. These tasks include contract reviews from outside vendors and service provider agreements, drafting agreements for most of DCU’s business areas, and risk reviews to pinpoint potential legal gaps in the departments that could prove troublesome — for example, bankruptcies, foreclosures, short sales, and repossessions for DCU’s large collection area and reviews of internal employment policies.

In addition, the attorneys take on research projects to help the credit union assess new areas and evaluate risks. They also have become the go-to people for research into the numerous legal questions that arise during day-to-day business areas. On some legal issues, such as lawsuits, 93A demand letters, and subpoena questions, they work with the credit union’s external attorneys.

A lot of the value came from their research and things we might never have done, such as risk reviews.

“They’ve exceeded my expectations in terms of the amount of work they’ve been able to do, and they’ve gained a lot of experience,” DeWitt says. “A lot of the legal issues that float through my area take a lot of time. To be able to research case law is invaluable to help us determine various risks.”

Eighteen months in, DeWitt is having no trouble keeping two attorneys busy. Instead, he finds he sometimes wishes he had three of them.

“I had a list of things for them to work on, but I haven’t got to three-quarters of it because of all the work that’s come their way from the different business areas,” he says. “We put a lot on their plate, but they do a lot of work.”

The fellowship program has placed graduates in banking and financial services organizations, but DCU is the first — and so far, the only — credit union in the program, says James Kossuth, assistance director for emerging and alternative careers at the law school. DeWitt has nothing but praise for the BU program and thinks other credit unions could benefit from this sort of arrangement.

“Going into it, we hoped we would get out of it what we wanted to get out of it,” he says. “At worst, we’d have someone for only one year. We thought we could benefit from it. We didn’t see any downsides.”

DCU’s ultimate goal is to determine whether it will benefit from bringing an attorney in-house, and the fellowship program is a safe way to test that. Although the BU fellowship program defines the fellowship period as a one-year commitment, DCU and its fellows have agreed to extend that.

“Six months in, it was going so well we asked them to stay on at least through this year and then we’d look at it again,” DeWitt says. “There’s an understanding that it will result in an in-house position at some point.”